Key Takeaways
- • Daniel Bustamante, founder and CIO of Bustamante & Co., holds a $13 million cumulative short position on homebuilder stocks, including DR Horton (DHI), KB Home (KBH), and the SPDR S&P Homebuilders ETF (XHB).
- • Bustamante forecasts home prices falling at least 15-20%, a call the article characterizes as an outlier relative to where most Wall Street economists see the housing market heading.
- • His thesis rests on consumer weakness: rising credit card debt, rising auto loan delinquencies, weak retailer earnings, and declining savings and checking balances, which he expects will force homeowners to sell and tap their home equity.
- • Per LendingTree, US credit card debt exceeded $1 trillion for the first time, and about 2.8% of balances are now late, up from roughly 1.5% in 2021.
- • Bustamante previously profited from a short bet against Carvana, which he cites as the basis for his track record in this trade.
Summary
Daniel Bustamante, the hedge fund chief investment officer who profited from a short position against Carvana shares the prior year, is now positioning for a significant slowdown in the US housing market. According to Business Insider, Bustamante, founder of Bustamante & Co., currently holds a $13 million cumulative short position across several homebuilder stocks, including DR Horton (DHI), KB Home (KBH), and the SPDR S&P Homebuilders ETF (XHB).
The core of his thesis is that a weakening consumer will push more homes onto the market, depressing demand for new construction and driving home prices down at least 15-20%. Bustamante acknowledges that his forecast diverges sharply from the consensus of most Wall Street economists, who expect a more moderate trajectory for housing. He argues that American households are beginning to strain and will eventually need to draw on the equity built up in their homes by selling in order to meet their obligations.
Bustamante cites several indicators of consumer stress. Rising credit card debt, climbing auto loan delinquencies, weak retailer earnings, and shrinking savings and checking account balances all feature in his analysis. The article references a Federal Reserve study finding that American households were poised to exhaust their excess pandemic-era savings by the end of September.
Supporting data on the credit side come from LendingTree, which reports that US credit card debt has surpassed $1 trillion for the first time in history. The share of balances that are late has also risen, with roughly 2.8% now delinquent, compared with about 1.5% in 2021 and above 2019 levels.
The core of his thesis is that a weakening consumer will push more homes onto the market, depressing demand for new construction and driving home prices down at least 15-20%. Bustamante acknowledges that his forecast diverges sharply from the consensus of most Wall Street economists, who expect a more moderate trajectory for housing. He argues that American households are beginning to strain and will eventually need to draw on the equity built up in their homes by selling in order to meet their obligations.
Bustamante cites several indicators of consumer stress. Rising credit card debt, climbing auto loan delinquencies, weak retailer earnings, and shrinking savings and checking account balances all feature in his analysis. The article references a Federal Reserve study finding that American households were poised to exhaust their excess pandemic-era savings by the end of September.
Supporting data on the credit side come from LendingTree, which reports that US credit card debt has surpassed $1 trillion for the first time in history. The share of balances that are late has also risen, with roughly 2.8% now delinquent, compared with about 1.5% in 2021 and above 2019 levels.
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